New York Markets After Hours

Maybe not 2008 — but still worrying

Commentary: Adens, Slothower cautiously bearish

By

PeterBrimelow

SEATTLE (MarketWatch) — Two top letters converge on a consensus: cautious bearishness.

The Aden Forecast, edited by Pamela and Mary Anne Aden, was my Letter of the Year in 2010. (See Dec. 30, 2010, column.) Stealth Stocks Daily, edited by Dennis Slothower, was my Letter of the Year in 2011. (See Jan. 5 column.) Both have distinctly apocalyptic view of the ultimate result of Fed market management.

But the Adens are implacably determined to snatch short-term opportunities, whereas Slothower tends to dig in for the long term, albeit emitting a steady steam of vitriolic commentary.

In their last monthly issue, the Adens warned alarmingly: “The similarities to 2008 are becoming almost eerie.” (See June 18 column.)

But now, even though writing after Thursday’s break, the Adens are distinctly more moderate: “[Stocks are] now on the decline, essentially trading within a neutral band between 12,850 and 12,250 for the Dow Jones Industrial Average
DJIA, -1.11%
These are the important support and resistance levels, and whichever way the Dow breaks out of this band will determine the next trend direction. Continue to stay on the sidelines.”

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For the first time in recent memory, the Adens are also cautious about gold, perhaps in part because of what they see as the U.S. dollar’s safe-harbor strength.

They write: “If gold closes clearly below $1,536 for a few days, it … would be a bearish sign. Gold could then decline similarly to its 2008 fall, which could take it down to the $1,350-$1,400 level. On the upside, gold won’t look stable until it closes back above $1,600 and silver above $28.50.”

They warn: “Keep your metals related positions for now, but should any changes take place, you’ll hear from us.”

At Stealth Stocks Daily, Dennis Slothower has moved in the opposite direction. He had been modestly bullish, by his standards. (See June 21 column.) But he wrote after Thursday’s market close: “If the indexes can’t hold above a simple 50-day moving average beyond a couple of days after the Fed extends Operation Twist, that reveals what I was saying yesterday at how weak the technical underpinnings of the market truly are.”

“Out of near 10,000 stocks [he follows], about 7% of them are now on ‘buys’ ... that’s pathetic. Like an airplane, the market has to get momentum and pick up some real speed to get airborne — or we come crashing back down, as we saw today.”

Stealth Stock Daily has added two short positions, making it 10% net long, 50% in cash.

Slothower notes that the Hulbert Financial Digest ranks his letter fourth out of 140 letters over the last five years. But this was with a gain of just 4.34% annualized versus negative 0.66% annualized for the total return Wilshire 5000.

Slothower’s rueful comment: “If only we had a persistent stock market either up or down instead of this whipsaw mess to build profits, but that’s coming.”

Slothower combines a darkly conspiratorial view of Wall Street with a sense of humor, or at least sarcasm.

On Thursday night, he sniped: “Not all the news is bearish, though. Today, Goldman Sachs
GS, -1.60%
recommended to its clients to short the stock market. Too funny! Remember, at the end of March they issued a buy recommendation to their clients — as the buying opportunity of a generation. I don’t know if this reverse psychology is going to work this time. These downgrades can’t be good for Goldman’s stock.”

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